Complicated process can eventually cost people their properties if they fail to pay taxes

Buyers can snap up homes in Gila County for pennies on the dollar if they do their homework.

At anytime, a list of properties lost due to non-payment of property taxes sits in the office of the clerk of the board. Each year, landowners who fail to pay their property taxes face the threat of losing their property.

Sometimes, that results in the sale of the property. Sometimes, investors effectively buy the debt on the taxes themselves — with the property as security should the property owner continue to refuse payment.

Unfortunately, sometimes a tax lien sale can come as a nasty surprise to homeowners.

One Payson resident was startled recently to receive notice that the county was putting his paid-off property up for sale to recover about $800 in overdue taxes.

Turns out, the homeowner bought the lot at the same time he bought his house and didn’t realize the monthly escrow account didn’t cover the property taxes due for the vacant lot. The county’s notices of the delinquency ended up going to the wrong address, so the homeowner barely learned in time of the tax lien auction.

“It was quite a shock to get the notice — finally — and very confusing.”

Moreover, the county assessor put a $136,000 value on a vacant lot with a garage, in the mistaken belief the garage was a stand-alone house — resulting in a steep property tax bill.

Fortunately, the assessor agreed to reconsider the assessment and give the homeowner more time to pay the overdue property taxes when the homeowner called to figure out what was happening.

The case demonstrates the complications of a process that’s become ever more frequent as homeowners slip-slide toward foreclosures.

At the initial overdue tax auction, the County sells the tax lien certificate to an investor. To purchase the certificate, the investor bids a percentage of interest on the tax lien in the hopes the owner will scrape together enough money to pay the back taxes. In order to complete the sale of the certificate, the investor must pay the back taxes, but they do not own the property yet, said Sheppard.

“A lot of investors are not in this for the property, they want the interest,” said Martha Gonzales, chief deputy treasurer for Gila County.

Generally, property owners pay the delinquent taxes because they have no wish to lose their property. When owners do make a payment, the investor receives payment for the back taxes plus the interest accumulated based on the rate they bid at auction, said Gonzales.

For example, if the back taxes totaled $450, had a six-month delay in payment and the investor bid 16 percent, the property owner would owe the investor interest of $432, plus the $450 for back taxes.

“You can’t get that kind of interest anywhere,” said Sheppard.

However, the risk is high because the property owner could fail to pay their taxes. If that happens, the investor holds onto the certificate for three years before they own the property — all the while paying the property tax.

“They are a silent landowner,” said Gonzales.

The majority of property available does not include homes, however. Most are tiny slivers of land created when owners divide property for one reason or another.

“You can split a parcel up to five times,” said Sheppard. “Sometimes the legal was not done right at the title or assessor’s office.”

These legal slip-ups create tiny slivers of land often on hillsides but sometimes next to a homeowner’s property, Sheppard said.

If a piece of property sits on the books with no tax payment or bid at auction for seven years, the county starts the process of placing the property on the books for sale.

Sheppard logs the deed along with a picture and address of the property. She lists the name of the previous owner, the parcel number, the legal description, tax lien amount and any additional fees assessed by the county treasurer.

Next Sheppard makes sure the county does not wish to purchase the property as a right of way or floodplain property. If the county shows no interest, she asks towns and cities if they want to purchase the property. Only after all of these items have been checked off the list does she advertise the property for sale.

“Anyone can come to the clerk of the board with a sealed bid,” said Sheppard.

The county started the sealed bid process a few years ago when a bidding war erupted between buyers who wanted to purchase property for significantly less than the taxes owed.

Anyone may now submit a sealed bid, but the price must at least cover the total lien amount owed.

“The board of supervisors may accept or reject the bid,” said Sheppard.

Once per year, usually at the end of November or the first week of December, the board holds a public auction of all lands they hold.